Mark Zuckerberg is an autocrat, and not hypothetically. Through his special voting rights held in Facebook’s Class B shares, he wields absolute command of the company, while owning just a handful of percentage points of the company’s equity.
Like any autocrat, he has taken extraordinary measures to maintain control over his realm. He produced a plan exactly two years ago that would have zeroed out the voting rights for everyday shareholders with a new voteless Class C share, only to pull back at the last minute as a Delaware court case was set to begin. He has received the irrevocable proxies of many Facebook insiders, allowing him to control their votes indefinitely. Plus, any Class B shares that are sold are converted to Class A shares, allowing him to continue to consolidate power as people leave.
And now, borrowing a page straight out of George Orwell’s 1984, he has even tried to retract and disappear his own messages to others on his platform (which has now been retracted itself after it became public).
While Congress is right to focus on Cambridge Analytica, and electoral malfeasance, and political ads, and a whole crop of other controversies surrounding Facebook, it should instead direct its attention to the single solution that would begin to solve all of this: dissolve Facebook’s dual-class share structure and thereby democratize its ownership.
Just as congressmen are elected under the principle of “one man, one vote,” it should demand that Facebook follow the highest standards used by most other publicly listed companies and return to “one share, one vote.”
Zuckerberg himself should certainly agree with this. After all, the original logic of creating a voteless share class was that the company’s financial performance was strong and Zuckerberg needed to be protected to continue it that way. The plan was announced the same quarter that Facebook crushed its financial results, and there was an absolutely implied connection between those results and the controlling stake held by Zuckerberg.
Yet in the two months, from its intraday peak at a share price of $195.32 on February 1, 2018 to today’s price of $160, Facebook has lost more than $100 billion in its market cap. If Congressional inquiries eventually lead to further regulation, it could further erode the value of the stock. It’s easy to argue that a chief executive should be protected when the performance of a company is rocketing up. It’s much harder when everything is crumbling and no one is being held accountable.
Shareholders may have been blinded by Facebook’s dizzying growth over the past few years, but we now know that the edifice of that growth is far more tenuous than we ever knew before. Zuckerberg’s 15-year apology tour can no longer sustain the view that corporate governance should be ignored for the good of the share price.
There’s just one problem though, and it is the problem that confronts any country with a tyrant: shareholders have no power here to affect change. They can’t change the composition of the board, they can’t change the management team. They can’t change anything at all, because one person controls the realm with an iron fist. A proposal back in 2015 to move to “one share, one vote” was struck down at Facebook’s shareholder meeting.
I am not asking for Zuckerberg to be fired, or to resign. I think people should clean up their own messes, and few people have the means to clean up Facebook right now other than him. But I do think there should be consequences, and so far, there have been exactly zero. Zuckerberg has to personally relinquish his control, and no act of mea culpa would better show that he understands the consequences of his actions.
There is a counter-argument, which is that ravenous mobs of private investors would swoop into Facebook and force the company to steal even more data from users to sell to advertisers if Zuckerberg lost control. I am wholly unconvinced though, mostly because Facebook has basically done precisely that over its entire history. Plus, any further deterioration of trust with users would strike at the heart of its financial results.
Zuckerberg says in his prepared statement that, “My top priority has always been our social mission of connecting people, building community and bringing the world closer together.” There are few things he could do to build the community around Facebook’s leadership than sharing the burdens and the responsibilities with a wider, more diverse set of people. Take a page from American history, and abolish the discrimination inherent in the dual-class share vote.